The share of senior citizen term deposits doubled in the last five years to 30% in FY24 as many have locked in their lifetime savings before the Reserve Bank of India (RBI) starts cutting rates, said a research report.
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The 30% share is in the number of term deposit accounts held by senior citizens and not the absolute amount. It is estimated that 7.4 crore term deposit accounts were held by senior citizens in FY24, as against 4.1 crore in FY19, according to a State Bank of India’s (SBI) research report released on Monday.
“The increase in deposit rates, the higher interest rate differential for senior citizens and the special deposit schemes for senior citizens (for example WE-CARE by SBI) have all propelled a tectonic shift in deposits accretion for senior citizens ably supported also by government initiatives,” said a SBI Research Ecowrap authored by Soumya Kanti Ghosh.
Most banks offer a 7% to 7.75% interest rate on senior citizen deposits, depending on the tenure. All banks offer a 50-75 basis point higher interest rate to senior citizens.
During these five-years the average ticket size per deposit rose 39% to Rs 4.6 lakh as against Rs 3.3 lakh five years ago, the report stated.
Out of such 7.4 crore odd accounts, almost 7.3 crore accounts should be in the size bracket of up to Rs 15 lakh.
The term deposits mobilised from the 7.4 crore are estimated at Rs 34 lakh crore in FY24 as against Rs 14 lakh crore in FY2018. Thus, in 6 years, there has been an increase of 81% in the number of accounts and 150% in amounts, the report stated.
The government has also raised the threshold of tax deductible at source (TDS) on deposits for senior citizens to Rs 50,000 now, possibly working as an additional fillip for deposit mobilisation for senior citizens, the report stated.
The government has also implemented schemes to support senior citizens, such as the Senior Citizen Savings Scheme (SCSS), which allows them to deposit up to Rs 30 lakh with a 5-year tenure. It offers an 8.2% interest rate, tax benefits, and secure investments.
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The report stated that the amount outstanding under this government scheme during the first half of FY24 stood at Rs 1.62 lakh crore, up Rs 1.44 lakh crore since FY14.
